Ten rules for getting rich and growing wealth
Over the last few years, I’ve given a lot of thought to what it takes to make wealth richer and richer. I’ve talked to countless millionaires, coached clients through my programs, helped people on my forums, and responded to more than 5,000 reader comments on this site. There are common themes that either help a person grow wealth or prevent a person from becoming rich in each case.
Being rich doesn’t always mean having money, but 90% of the time, it does. But, essentially, there are habits, behaviors, and “rules” that will allow you to become rich and to increase wealth. It’s not a process of the night. There’s no way to get rich quick schemes here.
What you’re going to read below are my ten rules for making wealth rich and growing over time.
Rule #1 – You Have To Earn It (Your Money, Your Wealth)
If you’re going to get rich and grow wealth, you’ve got to make it. There’s no way you’re going to get to what you want and where you want to be if you’re not trying to get there.
With the money, this is pretty simple. Would you like the money? Get the heck out there and start making it. Get a job, man. Get a second job. Get a third job. Start the side hustle and do side projects to make more money. Are you in college? Get a side job at college to pay for school.
The bottom line is, if you want to increase your wealth, you have to earn a living. There are potentially thousands of ways to make a living, and you need to find the most you can do and get to work. There’s no one stopping you. There’s nothing in your life to prevent you from doing so. The only roadblock you’re going to gain more is yourself.
So, stop with the excuses and focus on Rule # 1 to get started — you’ve got to make a living from your wealth.
Rule #2 – You Need To Save Until It Hurts
The second rule to getting rich is saving. It’s not enough to just earn money – you have to keep it as well. Otherwise, you’re just going to end up like any number of famous celebrities who have gone bankrupt. Income alone just doesn’t cut it off. You’ve got and save.
But the real “rule” of getting rich here is saving until it hurts. How much is it? Well, if you don’t hurt yet, that’s not enough.
For example, last year, I saved about 40% of my post-tax income. It sounds like a lot. But there are a lot of people out there who are saving more – many more than 50 percent of their income, if not more.
The truth is that Rule # 1 makes this rule easier. The more income you have, the easier it is to save more money. But even on lower incomes, you can still save. Here are 15 ways to save an additional $500 a month. Boom! Boom!
Rule #3 – You Need To Optimize Your Spending
The third rule to increase wealth is to optimize your spending. I’m not one who can judge your spending – spend more or spend less. My personal belief is that you should buy whatever you won’t – make more money so you can afford it.
But no matter what, truly rich people are optimizing their spending. This means they’re going to find good deals – even if they’re going to buy a Ferrari, you can bet they’re looking for a deal and negotiating a price.
The trick here is to spend wisely – especially on your biggest expenses. For most people, it could be cars, insurance, health care, and more. Too many people here choose “whatever” or don’t really think about what the choices are. Wealthy people stop, think, and choose a choice that maximizes their benefits while minimizing their expenses.
So, if you’re ready to increase wealth, start identifying and optimizing your spending.
Rule #4 – You Must Put Your Money To Work For You
The fourth rule is that you have to put your money to work for you. Earning this is your part of the heavy lifting. You need your money and the power of compound interest to work together over time to build wealth for you.
What does this mean? It means you’re going to need to invest. Why? Why? Because the average inflation-adjusted return for the S&P500 over the last 60 years has been 7%.
You need your money to grow, and you need to make more money. You need to start building revenue streams with your money. The goal is that your hard work upfront can help you build a passive income stream for the future.
Would you like to make $50,000 a year without working? Here’s a simple breakdown of how to make your money work for you. It’s all about making money work for you, not against you.
Rule #5 – You Need To Marry Smart
The fifth rule to build wealth is to marry smart. Why? Why? Because a great spouse can be a massive force multiplier when it comes to building wealth, while at the same time, divorce is the biggest destroyer of wealth. In fact, a recent study found that divorce destroys 75% of personal net worth.
On the building wealth front, a great duo can make a living together, accumulate together, and watch their double-earnings compound over time. It’s a massive force multiplier to build wealth. Interest in $2 is always higher than an interest in $1.
But divorce has the potential to ruin financial lives if you’re not smart to marry. Beyond dividing things 50/50, there may be lawyers’ fees and more. Plus, compound interest now has only a small amount to work with – so it’s just slowing down.
The fact is, however, that according to the American Psychological Association, 40-50 percent of marriages end up in divorce in the United States. That doesn’t mean divorce has to be a financial disaster. If you’re married smart to get started, hopefully, your ex-husband will also be financially sound when it comes to divorce, and you can do things as friendly as possible.
Rule #6 – You Always Need To Minimize Your Taxes
The sixth rule for getting rich is always to minimize your tax liability. No matter your income level, you always need to think about how to minimize your taxes. Taxes can prevent you from realizing wealth over time because they constantly eat away at your income and your return on investment.
For example, the S&P 500 had an average annual nominal return of 11,09 percent over the last 30 years. However, taking into account taxes, fees, and inflation, the investor’s real return would have been only 5.97 percent, according to this report. That’s 46% of your return, eliminated by taxes, fees, and inflation.
However, there are a number of actions you can take to minimize your taxes. First, take advantage of tax-deferred investment accounts. Max out your 401k or 403b, take advantage of the Individual Retirement Account (IRA), and leverage the Health Spending Account (HSA).
If you don’t want to give your wealth to the government, taxes should be close to the top of your mind when you make any money decisions.
Rule #7 – Ensure Yourself And Protect Your Family
The seventh rule to make wealth rich and build wealth is that you need to make sure that you protect your wealth and your family. I’m not even talking about life insurance here – I’m talking about making sure you have health insurance and disability insurance.
I’ve had two coaching clients in the last year who have been affected by health issues that they haven’t been prepared for, and they’ve become financially endangered because they haven’t been prepared. I also had several other instances of people becoming disabled to the point that they or their family members could no longer work. The result, huh? The financial risk.
The time to make sure yourself is when it’s all going well. Every person who wants to build wealth and make it rich needs, at the very least:
- Health Insurance
- Life insurance policy
- Short-term and long-term disability
Rule #8 – You Need To Take Care Of Yourself First
The eighth rule of building wealth is to take care of yourself first. It’s not as much a rule of money as a rule of life.
When you’re on a plane, the flight attendant always makes his safety speech, reminding you to put your oxygen mask on first before helping someone else? There’s a reason for that – if you’re unconscious, you can’t help anybody else.
When it comes to building wealth, you have to take care of yourself first – even when dealing with family. This can be really hard for some people, especially those who haven’t had a lot, and now they have something they can share. And others may realize it, and they may ask.
If you want to help others, make sure you first put yourself on solid ground and follow all the rules. I have seen it too many times where generosity leads to financial ruin.
Rule #9 – Surround Yourself With People Better Than You
The ninth rule to become rich is to surround yourself with people better than you in all aspects of your life. On the family front – if you’re being held back, you’re going to distance yourself. Married upstairs. Don’t let the family be the reason you can’t make your dreams come true.
Friends, huh? Find the ones that make you a better person. Drop the moochers, man. Drop the haters, man. Drop those who are lazy.
Work? Find a mentor who does what you want to do and kills him. If they don’t have the bandwidth to meet you, just watch them and see what they’re doing. From a distance, you can learn a lot.
Just like Rule # 1, you’ve got to make it. Find people who are going to help you with that. You don’t have to settle for the life you were born into if you don’t want it.
Rule #10 – It’s Okay To Go Slow
Finally, the last rule for building wealth is, remember, and it’s okay to go slow. This is especially true for millennials.
I feel like everyone under the age of 30 wants the next thing, the next job, the next milestone, the next big paycheck. But they’ve never done this thing, they’ve learned this job, they’ve achieved the current milestone.
Building wealth takes time to build. It’s about earning a living today and leveraging time tomorrow. This is how wealth is made. Even if you landed $150,000 a year to work today, you’re no richer. Your first paycheck for this great new salary could be $5,000 to take home. That’s not wealth. This is the starting point. This is something that needs to be built on.
According to The Spectrum Group, the average millionaire in the United States is 62 years of age. Only 1% of all millionaires are under 35. Keep that in mind on your journey of building wealth.
